Mellanox Drop Shrinks Premium to Intel: Russia Overnight

By Halia Pavliva -
Aug 21, 2013

Mellanox Technologies Ltd. (MLNX), the
Israeli maker of equipment that speeds electronic data
transfers, fell to a sixteen-month low in New York amid concern
revenue will decline this year as customers cut spending.

Shares of Mellanox slid 1.3 percent to $40.46 in New York
yesterday, shrinking its premium to Intel Corp. (INTC) The shares
declined 0.7 percent to 142 shekels, or $39.88, at 11:36 a.m. in
Tel Aviv. Alvarion Ltd. (ALVR), which surged almost sixfold since Aug.
14 on takeover speculation, plunged 24 percent in New York after
a report that private-equity firm Sigma Wave Ltd. made an offer
for the wireless communication equipment maker.

Mellanox will post the first annual decline in sales since
at least 2004, according to the average estimate of 15 analysts
surveyed by Bloomberg. The stock trades at 22 times estimated
earnings, or double the valuation of bigger technology companies
from Intel to Cisco Systems Inc., data compiled by Bloomberg
show. San Jose, California-based Cisco forecast sales that
missed most analysts’ estimates last week as companies and
network operators postpone costly overhauls of their networks.

“Mellanox’s premium to peers isn’t justified until there
is more visibility in terms of the web spending,” Andrew Nowinski, an analyst at Piper Jaffray Cos., said in a phone
interview from Minneapolis yesterday. “We believe investors are
still concerned with the limited visibility into spending trends
in the back half of 2013.”

Nowinski cut Mellanox, which plans to delist from the Tel
Aviv Stock Exchange Sept. 1, to the equivalent of hold from buy
on July 25 and reduced his share-price estimate by 31 percent.

Trading Volume

Sales at the Yokneam Elit, Israel-based company will
decline 18 percent to $408.7 million this year, according to the
average estimate of 15 analysts surveyed by Bloomberg.

Brian Sparks, a spokesman for Mellanox in Sunnyvale,
California, declined to comment on the stock slump when
contacted by Bloomberg News yesterday.

Mellanox’s adjusted profit fell 68 percent in the second
quarter to $13.8 million, the company said last month, exceeding
the $8.46 million average estimate of 13 analysts surveyed by
Bloomberg. Sales sank 26 percent, falling short of analyst
projections, and the company forecast third-quarter revenue
between $104 million to $109 million, compared with an average
estimate for $111.5 million.

Alvarion slumped to 88 cents in New York yesterday, the
biggest decline in four weeks. The shares in Tel Aviv fell 13
percent to 3.14 shekels, or 88 cents, today.

Sigma is offering as much as 30 million shekels ($8.45
million) for the gear maker, Calcalist reported yesterday. The
amount would represent a 22 percent discount on the company’s
market value of $10.84 million as of Aug. 19, according to data
compiled by Bloomberg.